Korean Air gets minority stake in Czech Airlines

Representatives of the Czech government and Czech Aeroholding signed an agreement with Korean Air on Wednesday, giving the South Korean state airlines a 44-percent stake in Czech Airlines. The Czech side sees the new partnership as a long-awaited lifeline for the struggling state airline, while the Koreans are hoping to gain a stronger foothold in Europe.

Photo: Czech Airlines

Like many state airlines around Europe, Czech Airlines have been badly hit by rising oil prices, expansion of low-cost carriers and a drop in air travel. In the past six years, the air carrier has had to reduce its fleet by half and has had serious financial problems since 2009. Having suffered losses of 241 million crowns in 2011, Czech Airlines were facing an increasingly uncertain future before the bid from the South Korean carrier came earlier this year.

Korean Air is purchasing its minority stake for a relatively low 67.5 million crowns (or around 3.4 million dollars), though experts confirm that this is an appropriate sum for the 44% share, given the current value of Czech Airlines.

The Finance Ministry, which oversaw the latest bidding process, is not concerned with the price, though. After a failed attempt to sell off the airline in 2009, the Czech government decided that a strategic partnership would be more valuable.

At Wednesday’s signing ceremony in Prague the President of Korea Air Chang Hoon Chi said the partnership would bring benefits to both sides:

Prague’s Václav Havel Airport, photo: CzechTourism

“The two companies will become strategic marketing partners after this ceremony, and I believe our strong partnership will create win-win benefits such as market development and route expansion.”

Last year, Korean Air served some 23 million travelers, almost five-fold what Czech Airlines handled. The new partnership should bring the ailing Czech carrier much needed customers.

Korean Air already operates four direct flights a week from Seoul to Prague and back, and is hoping to increase the frequency and use Prague as its jumping-off point to European destinations. Prague’s Václav Havel Airport is expecting the deal to bring in hundreds of thousands more travelers.

The Czech government sees a number of advantages in the partnership, according to Finance Minister Miroslav Kalousek:

“In my opinion, this deal will secure the growth and future of Czech Airlines in the best way possible. It will save jobs and it also offers excellent prospects for Prague’s international airport, since Korean Air will create its European hub here.”

Miroslav Kalousek, photo: Filip Jandourek

Considered to be among the top 20 airlines in the world in terms of its services, Korean Air also promises higher prestige for Czech Airlines. Its passengers can look forward not only to better deals on flights to East Asia, but also improvements in onboard service, which Korean Air are well-known for. The Czech Airlines’ representatives said that they have already discussed improvements in service with their new partner, and will be implementing them in the near future.